COMPANY ‘A CITIZEN’ OR ‘NOT’ ?

A company is a legal person in the eyes of law and can hold property, sue and
be sued in its own name. Though a company is an artificial legal person, it is
not a citizen under the citizenship legislation or constitution. A company
cannot be treated as a citizen as the citizenship recognition is only available to
natural biological persons and not to juristic persons.
Narasaraopeta Electric Corpn. Ltd. v. State of Madras [1951] 21 Comp.
Cas. 297 (Mad.), the High Court observed that a company incorporated under
the Indian Companies Act does not satisfy the requirements of the definition of
‘citizen’ in Article 5 of the Constitution and therefore is not a citizen.
A company is also not allowed to lay claim to fundamental rights on the basis
of its being an aggregation of citizens. Once a company or a corporation is
formed, the business of the company or corporation is not the business of the
citizens but that of the comand cannot be judged on tpany or corporation
formed as an incorporated body, and the rights of the incorporated body must
be judged on that footing he assumption that they are the rights attributable to
the business of individual citizens – Telco Ltd. v. State of Bihar [1964] 34
Comp. Cas. 458 (SC).

State Trading Corporation of India v. Commercial Tax Officer[AIR 1963 SC

1811]
Relevance of the case:
1. has defined what rights are available to juristic or artificial persons and
whether Part II and Part III apply to such entities.
2. has helped define whether an Artificial or Juristic Person can be called a
‘natural citizen’ within the meaning of the Citizenship Act of 1955.
Facts: The State Trading Corporation of India is registered under the Indian
Companies Act of 1956 as a private limited Company. Its head office is situated
in Delhi and its entire capital is contributed by the Government of India.
The Sales-tax authorities of Bihar and Andhra Pradesh had initiated
proceedings to assess the sales tax of the corporation under their respective
sales tax Acts. Accordingly, these states issued notices of demand.
Upon such notice, the petitioners through a writ petition of certiorari under
Article 32 of the Constitution sought for quashing the proceedings initiated by
the State governments.
The corporations claiming to be citizens alleged that such proceedings would
infringe their Fundamental Rights under Article 19 (f) and (g).
Issues: (1) Can the State Trading Corporation registered under the Indian
Companies Act of 1956 claim to be Indian citizens under Article 19 of the
Constitution and
(2) Whether the said Corporation can claim for the enforcement of
Fundamental Rights under Article 19?
(3) Whether the State Trading Corporation is an organ of the Government of
India as its entire capital is contributed by the Government and can the said
Corporation enforce Fundamental rights under Part III against the State
defined under Article 12 of the Constitution?
Contentions put forth by the Petitioners:

● It was contended that Fundamental Rights under Part III of the

Constitution would also be applicable to juristic persons.
● Mr. Setalvad contended that Part II of the Constitution and the
Citizenship Act, 1955 are irrelevant in the present case as they do not
define the term ‘citizen’ or deal with citizenship in its totality. It was
submitted that ‘nationality of the company is synonymous with
‘citizenship’.
● It was contended that the term ‘citizen’ be liberally construed to
include a corporation which consists of Indian citizens.
● It was submitted that the distinction between “persons” and “citizens”
is not the same thing as the distinction between ‘natural person’ and
‘juristic person’. It was contended that “person” would include citizens
and non-citizens as well as an artificial or juristic person.

Contentions put forth by the Respondents:

● It was contended that the State Trading Corporation being an artificial

person cannot claim to be a citizen under Article 19 as the term
‘citizen’ under the said article refers to only ‘natural person’.
 ● It also contended that the Corporation is a department of the
Government, and cannot claim protection against an action of the
State under Article 19.

Judgment:

● The court stated that Part III, which deals with Fundamental Rights, of
which some are available to “any person” and some rights are available
only for “all citizens”.
● The fundamental rights available to any person regardless of whether
they are citizens or an artificial person are: Article 14, 20, 21, 26, 27, 28,
29, and 31.
● The fundamental rights available exclusively to citizens of India are
Article 15, 16, 18.
● Article 19 which the case is concerned with mentions 7 clauses namely:
1. Freedom of speech and expression
2. Freedom to assemble peacefully without arms
3. Freedom to form associations or unions
4. Freedom to move freely throughout the territory of India
5. Freedom to reside and settle in any territory of India
6. Freedom to acquire and dispose of property
7. Freedom to practice any profession, or to carry any occupation, trade
or business.
● The court stated that clauses (a) to (e) are only applicable to citizens
whereas clauses (f) and (g) can be enjoyed by natural persons as well as
juristic.
● The right to move the Supreme Court by way of Article 32 is a
fundamental right available to all.
● Under the Constitution ‘all citizens’ are persons but ‘all persons’ are not
citizens
● The court stated that the term ‘citizenship’ has not been defined in the
Constitution. Part II of the Constitution, namely Articles 5-11 deal with
citizenship. The court while stating all the necessary provisions of Part II
of the Constitution noted that these rights within Part II were
inapplicable to juristic persons. Juristic persons are also outside the
purview of the Citizenship Act of 1955 enacted by the Parliament by
power of Article 11. In the Act, Section 2 (1) (f) states that the word
‘person’ does not include ‘any company or association or body of
individuals whether incorporated or not’. Thus, any subsequent
 provisions of the Act relating to citizenship will not be applicable to
juristic persons.
● The court on examining the relevant provisions of the Constitution and
the Citizenship Act, 1955 regarding the present case concluded that the
corporation cannot be considered a ‘citizen’. It was stated that
corporations may have nationality in accordance with the country of
incorporation but that does not confer upon them the right of
citizenship.The court held that Part II of the Constitution and the
Citizenship Act,1955 was exclusive to a natural person only.
TATA ENGINEERING AND LOCOMOTIVE CO. LTD. vs. STATE OF BIHAR
AND OTHERS [1964]

Facts: The petitioners were ordered to pay sales-tax on account of certain

transactions made by them in the State of Bihar. Their contention was that
the sales in question took place outside the state and hence they were
entitled to the protection of Art. 286(1)(a).Their plea was rejected by the
Sales-tax authorities and it was held that Art. 286(1)(a) did not apply to
them. The petitioners challenged the orders of the sales-tax authorities by
writ petitions filed by them under Art. 32 of the Constitution.A preliminary
objection was taken on behalf of respondents that the petitions were not
competent as those were filed by corporations or companies and the provisions
of Art. 19 did not apply to them as corporations were not citizens.
Judgment:
● Once a company or a corporation is formed, the business which is
carried on by the said company or corporation is the business of
the company or corporation and is not the business of the citizens
who got the company or corporation formed or incor-porated and the
rights of the incorporated body must be judged on that footing and
cannot be judged on the assumption that they are the right
attributable to the business of individual citizens.
● The position of a corporation is that it is in law equal to a natural
person and has a legal entity of its own. That entity isentirely separate
 from that of its shareholders. It bears its own name and has a seal of
its own. Its assets are separate and distinct from those of its
members. It can sue and be sued exclusively for its own purpose. Its
creditors cannot obtain satisfaction from the assets of its members.
The liability of the members or shareholders is limited to the capital
invested by them. The creditors of the members have no right to the
assets of the corporation.
● The legal personality of a company is altogether different from that of its
members and shareholders; it cannot claim protection of fundamental
rights although all its members are Indian citizens.
● Though a company is not a citizen, it does have a nationality, domicile
and residence.
● a company's nationality is determined primarily by its place of
incorporation.
● In case of residence of a company, the company resides where its real
business is carried on and the real business of a company shall be
deemed to be carried on where its Central management and control is
actually located.

Chiranjilal Chaudhari v. Union of India [1951] 21 Comp. Cas. 33, the

Supreme Court held that the fundamental rights guaranteed by the
Constitution are available not merely to individual citizens but to corporate
bodies as well except where the language of the provision or the nature of the
right compels the inference that they are applicable only to natural persons.

Bennett Coleman Co. v. Union of India [1972] S.C.C. 788, 806, the
Supreme Court extended the rule by stating “it is now clear that the
fundamental rights of shareholders as citizens are not lost when they associate
to form the company. When their fundamental rights as shareholders are
impaired by State action, their rights as shareholders are protected. The reason
is that the shareholders’ rights are equally and necessarily affected if the rights
of the company are affected.